Earnings grew faster than the favorable 15% CAGR delivered to X-FAB Silicon Foundries (EPA:XFAB) shareholders over the last three years

By
Simply Wall St
Published
February 23, 2022
ENXTPA:XFAB
Source: Shutterstock

It hasn't been the best quarter for X-FAB Silicon Foundries SE (EPA:XFAB) shareholders, since the share price has fallen 20% in that time. But that doesn't change the fact that the returns over the last three years have been pleasing. In the last three years the share price is up, 53%: better than the market.

While the stock has fallen 6.4% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for X-FAB Silicon Foundries

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, X-FAB Silicon Foundries achieved compound earnings per share growth of 55% per year. The average annual share price increase of 15% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
ENXTPA:XFAB Earnings Per Share Growth February 23rd 2022

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

X-FAB Silicon Foundries shareholders are up 5.0% for the year. While you don't go broke making a profit, this return was actually lower than the average market return of about 17%. But the (superior) three-year TSR of 15% per year is some consolation. Even the best companies don't see strong share price performance every year. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that X-FAB Silicon Foundries is showing 1 warning sign in our investment analysis , you should know about...

Of course X-FAB Silicon Foundries may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR exchanges.

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